Canada’s top court decision makes it easier for common law spouses to get a fair share when separating

In a decision released on February 18, 2011, the Supreme Court of Canada has made it easier for unmarried (common law) spouses to claim a share in the wealth accumulated during the relationship when breaking up [Kerr v. Baranow, Vanasse v. Seguin].

What does this decision mean?

In Ontario, separating married spouses are entitled to apply for an equal division of property accumulated during the marriage, under the Family Law Act, however, unmarried spouses are not. In Ontario, and in many other provinces in Canada, unmarried spouses are excluded from the matrimonial property sharing provisions of the Family Law Act. The Supreme Court of Canada has now made it easier for unmarried spouses, or “common law” couples, to obtain a more equitable division of assets accumulated during the relationship in circumstances where the relationship can be described as a family unit, or as the Court put it, a “family joint venture”.

How has this changed the law?

In Ontario, it used to be the case that a common law spouse seeking to share in some or all assets accumulated during the relationship had to show a specific link between his or her contribution, either through money or some form of services, and the specific asset sought to be shared (whether it be on a 50/50 basis or some other proportion). Or, if no direct link could be shown between the asset and the contribution specifically, he or she could be compensated financially for contributions using a “fee for services rendered” model.

Neither approach truly reflects the reality of what the court termed a “family joint venture”, nor how such a family unit functions financially or otherwise. In the Vanasse case for example, prior to the birth of the children, the common law wife had, and was focused on, her career, as was the common law husband. Following the birth of the couple’s first child, she left the workforce and stayed home, becoming, as she and the Courts termed it “the CEO of the kids”, while her common law husband was away from home, worked long hours, and travelled significantly to grow his business, becoming the “CEO of finances”. Not only did the common law wife lose out on the opportunity to acquire and amass wealth on her own, but, more importantly, her common law husband benefited greatly as he could work long hours and travel a lot to grow his business, knowing that his children and home were taken care of. The legal recognition of the concept of a family joint venture acknowledges the realities of a functioning family unit as a “unit”, rather than two people, keeping their finances separate but living together.

With this decision, rather than forcing the common law wife to show a direct causal link between the wealth her spouse was able to amass and her contributions, or paying her for several years’ wages that a nanny and housekeeper might earn, our courts are now told to focus on the fact that this was a family unit; that realistically, this family would not have functioned, allowing that wealth to be accumulated, without her contributions, recognizing that she was not just a nanny and housekeeper, that she was a true partner in this “family joint venture”.

Does this mean unmarried spouses now share property in the same way as married spouses?

The big question is, does the Court’s decision mean that common law spouses now share assets in the same way as married spouses. The answer is no. While the decision has made it easier to do so, there is no presumption that common law spouses share equally in accumulated assets. The claim must still be based on the concept of “unjust enrichment”. Nor is there a presumption that unmarried couples operate as a joint family venture. Such a finding must still be based on the specific facts and circumstances of the relationship. Once a common law spouse can show that the other spouse has been unjustly enriched by his or her contributions, financial or otherwise, the court is then tasked with making a determination as to the proportionate sharing of wealth.

Can unmarried spouses avoid these types of disputes?

The law is now more flexible, which means that the outcomes will vary. There is no magic formula for the court to use in making a determination as to how wealth is to be shared. The analysis of unjust enrichment claims is very fact driven. Couples may continue to disagree as to the actual effect of one spouse’s contributions through such efforts as child rearing, maintenance of the home, or assisting in running a family business, among many other contributions, and the accumulation of wealth by the other spouse.

The best advice on how to address these issues, before they turn into disputes, is to clarify from the beginning about how wealth accumulated during a common law relationship is to be dealt with upon separation and through detailed cohabitation agreements which set those terms out explicitly, including, and most importantly, with respect to the issue of unjust enrichment.